Recently I attended a workshop hosted by LawPro, the professional liability insurance provider to lawyers. Apparently, an increasing number of lawyers are being targeted by fraudsters and scam artists.
Besides the prevalent mortgage fraud that has been plaguing the industry for years (where the rogue client mortgages a piece of property for far greater than its value), a new kind of fraud targeting civil litigators is becoming more and more common.
The emerging type of fraud generally requires lawyers to pay out money from their trust accounts before the funds are cleared through the system.
Typically, the fraudster poses as a new client retaining the targeted lawyer for a collection matter with very generous compensation. The file looks legitimate with correspondences, ledgers, and other supporting documents in place.
The collection is surprisingly smooth, with little or no resistance from the debtor, and the lawyer receives a “certified cheque” very quickly. After the cheque has been deposited into the lawyer’s trust account, the “client” is in a rush to get the funds, claiming financial distress.
The lawyer listens to the sob story and pays out the funds before the cheque is cleared through the system.
You guessed it: the certified cheque in question turns out to be a fake, and the lawyer ends up with a significant shortfall in the trust account. Under the Law Society by-laws, the lawyer is required to cover the difference personally.
Depending on the circumstances, there may or may not be insurance coverage available for the lawyer.
